Demand is weakening across the board. New mortgage lending shrank at the fastest pace in more than two years in June, according to separate official figures published this week. The PCI, published by Ai Group and the Housing Industry Association, shows housing activity weakened for a third month in July.
The monthly index of activity in detached house building – based on a sentiment survey of purchasing managers in the sector – fell 4.6 points to 34.6 points on an index where a figure below 50 indicates contraction.
‘End to the boom’
“Confidence in the housing sector has been adversely impacted by rising rates which will compound the rise in the cost of construction,” HIA economist Thomas Devitt said.
“This has not yet materialized in slowing sales or approvals of new homes and there is still a large volume of building work in the pipeline to complete. Recent declines in confidence … reflect an anticipation on the part of builders of less new work entering the pipeline in coming months as the RBA’s current tightening cycle will, inevitably, bring an end to the boom.”
For a company such as Metricon, which expanded rapidly thanks to the federal government’s HomeBuilder scheme and other stimulus programs – its dwelling commencements surged 33 per cent – that means a huge hangover has set in as it is crunched by surging material costs and labor shortages.
Metricon, which had 6052 housing starts last year, said on Tuesday it had started a consultation process with affected staff that would lead to redundancies.
Mr Langfelder said Metricon expected to continue to sign 100 contracts a week, in line with pre-pandemic levels, and that it expected more than 6000 housing starts next year.
The Gold Coast and Brisbane home building markets have suffered some of the biggest increases in overall construction costs, in residential and commercial, and it was in these markets that Metricon earlier this year tried to renegotiate higher prices with contracted customers, before giving up on the idea.
In mid-May, the builder also suffered the sudden loss of founder and chief executive Mario Biasin, who was said to have experienced mental health issues.
It is not the only home builder caught between fixed-price contracts and rapidly rising costs. Sydney-based Rawson Group last year received a $40 million loan from parent company Daiwa House to help it trade through the current tough conditions.